Economics

Oil

Burning their wealth

BRAD PLUMER links to a Wall Street Journalstory on Saudi Arabia's increasing consumption of its own oil output. The story reads:

With domestic electricity demand rising 10% per year in Saudi Arabia, the kingdom now devours more than a quarter of its oil production—nearly three million barrels per day. International Energy Agency figures show that Saudi Arabia now consumes more oil than Germany, an industrialized country with triple the population and an economy nearly five times as large.

The Economist actually ran a piece on this last week which came complete with snazzy map:

The really striking thing in our story is the nature of rising Saudi consumption:

Saudi power-generating capacity has doubled in the past decade. Partly this is to mitigate the fearful heat: according to a report from Chatham House, a think-tank, air-conditioning units soak up half of all power generated at peak consumption periods.

The second relates to economic structure. It takes energy to produce energy: pumps must be powered and vast quantities of seawater desalinated. Aramco, the Saudi state oil company, sucks up nearly 10% of the country's energy output. Attempts to diversify the Saudi economy beyond oil, gas and petrochemicals have not gone far.

The third reason for rising Gulf consumption is the inefficiency of domestic energy markets. Some 65% of Saudi electricity is generated using black gold, even as successive price shocks and the relative inefficiency of oil generation have seen it all but phased out in rich countries. Oil is used with such profligacy because domestic consumption is massively subsidised. According to the International Energy Agency, global oil subsidies added up to $192 billion in 2010. OPEC countries accounted for $121 billion of the total...

Saudi Arabia is trying to develop nuclear and solar energy. But its fleet of oil-fired power stations will keep going for years. And as Mark Lewis of Deutsche Bank points out, two more big ones are now being built. On current trends the kingdom would become a net importer of oil by 2038 (unlikely though that is).

Saudi Arabia uses as much oil per person as America, largely to run oil-fired power plants to run domestic air conditioners. And the more of its oil siphoned off for such uses, the less cushion there is in the world's oil supply. That's a big problem now but is becoming less of one. America and Europe are cutting consumption and massively scaling up production. Saudi Arabia's oil thirst merely deepens its dependence on a finite resource, suggesting that the inevitable day of reckoning will be a difficult one indeed.

It was the Emir of Dubai, Rashid bin Saeed Al Maktoum. He said, "my grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel." Dubai has managed to diversify its economy far more successfully than all the other Gulf petrostates.

US population is 313 MM, oil consumption is about 19 MM bbl/day, which means oil consumption per capita per day is 0.061 bbl. Saudi Arabia's population is 27 MM, oil consumption is about 3 MM bbl/day, or 0.111 bbl per person per day. The correspondent claimed that "Saudi Arabia uses as much oil per person as America". Correspondent is good with words, and bad with math - Saudi Arabia uses almost twice as much per capita.

I think you need to account for Canada's very small population relative to America and Mexico. an 18% rise in Canada could be offset by a roughly 1.4% decrease on Average between the USA and Mexico. That being sad it is a shameful thing for Canada to be so glutinous versus their Southern friends.

I'm a little bit confused about the reported "North American" numbers -- are they with or without the Canadian numbers? And the same for Europe and Russia? Does Russia count as entirely European or is some proportionally distributed to Asia?
If the North American drop includes Canada's 18% rise, that means the US and Mexico have had some pretty hefty declines?
That seems like good news if it's due to conservation, and bad news if due to demand failure. I'd guess it's a mix of both.
Follow-up article?

IF EACH COUNTRY DISCLOSE IT'S CONSUMPTION WE WILL FIND CORRECT RESULT. BUT WHAT HAPPEN NOW IS COMPETITIVE GROWING TO HIDDING THE DATA THAT'S RELATE FOR IT'S POLITICAL CIRCUMSTANCE .. SO YOU CAN NOT JUDGE !!

For the good of the entire world the rich countries which includes S.Arabia should moderate their consumption because the other developing countries are furiously catching up and are becoming oil guzzlers for their economies and there should be some meeting point where all the consumptions are balanced so that world economies won't fall into grave situations.It is in the interest of the oil producers enforce a self-discipline in their own consumptions for a better future and it is in everyone's interest that all try to develop alternative energy resources on a war footing to save the planet.

You really have to be careful with the source of the statistics and the methodology.

In this case, I suspect "consumption" includes refining and petrochemicals. The products (gasoline, gasoil, polyethylene, polypropylene, other fuels and chemicals) are actually exported for consumption elsewhere in the world.

Although you I agree with your point regarding the morality of world-leading per capita energy consumption, it should be noted that what the article says about needing energy to produce energy applies to Canada's booming oil sands production. Canada's higher economic and population growth relative to US and Mexico also accounts for some of the nominal increase.

How many people world-wide have suffered because of OPEC's cartel ? How much mischief in the world has been funded from the flood of unearned Saudi money? The Wahabi shower the Islamists with cash, while Pakistan harbors them.

For the US, with such friends, who needs enemies?

If the parasitic Saudi royal family were deposed, I think that the Saudi people would suffer for a time amid the confusion, but then find themselves much better off.

No one can effect climate change in a country like India and only nature has to help.We don't need to convert into a oil consuming giant and it is more essential that we start developing other energy resources like renewables and be content with moderate living standards.